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AUD/USD and NZD/USD Fundamental Daily Forecast – Weak Aussie Retail Sales, Trade Balance Data Could Trigger Another Steep Break

The sell-off in the AUD/USD could continue on Thursday with the release of the Australian Retail Sales report and the latest news on Australia’s Trade Balance.

The Australian Dollar tumbled to a two-month low on Wednesday as sellers increased bets on a rate cut by the Reserve Bank of Australia later this year. The New Zealand Dollar fell in sympathy with the Aussie as investors also increased the odds of a rate cut by the Reserve Bank of New Zealand.

At 21:46 GMT, the AUD/USD is trading .7031, down 0.0054 or -0.75%, and the NZD/USD is at .6770, down 0.0028 or -0.42%.

The catalyst behind the selling pressure was a weaker-than-expected Australian Gross Domestic Product (GDP) report, which was released early Wednesday, just one day after the RBA’s upbeat assessment of the economy failed to reduce bets of a future rate cut.

The GDP report said the Australian economy grew at a 0.2 percent pace in the fourth quarter of 2018, falling short of the 0.3 percent forecast by analysts.

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The RBA and the RBNZ are the last of the major central banks to post a somewhat hawkish front. If the RBA were to turn dovish by hinting at a future rate hike, it would be following other central banks in growing more cautious about the economic outlook.

Although the RBNZ showed little signs of turning dovish in its last monetary policy statement, Wednesday’s price action suggests investors expect the weakness in the Australian economy to spread to the New Zealand economy.

“The key domestic demand components were all weak and our economists suggest the door for rate cuts has opened further,” said Adam Cole, currency strategist at RBC Capital Markets.

Additionally, “The moves are about the dovishness of their central banks and deterioration in their domestic data,” said Ben Randol, senior FX strategist at Bank of America Merrill Lynch in New York.

Daily Forecast

The sell-off in the AUD/USD could continue on Thursday with the release of the Australian Retail Sales report and the latest news on Australia’s Trade Balance.

Australian Retail Sales are expected to have risen 0.3% last month, up from -0.4%. The Trade Balance is expected to have dropped from 3.68 billion to 2.85 billion.

Weaker-than-expected reports would likely lead to another drop in the Aussie as this news would continue to raise the chances of an RBA rate cut.

This article was originally posted on FX Empire

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